Dollar Plunges as Weak Payrolls and Hawkish Fading Weigh on Markets

The US jobs report released in July delivered a surprise to markets worldwide, sparking a sharp decline in the Dollar and a surge in precious metals. Nonfarm payrolls unexpectedly fell by 23,000 in July, missing expectations of an 85,000 increase.

However, this was not the only disappointment from the report. May payroll growth was revised down from 129,000 to 63,000, while June's figure was revised from 57,000 to just 20,000. This combined downward revision wiped out a total of 103,000 previously reported employment gains.

As a result, the probability of another Fed rate hike in September was cut to around 42%, representing a significant challenge to the hawkish case put forward by several Fed officials this week.

The Dollar reaction was broad, with EUR/USD and AUD/USD breaking fresh highs for the week. USD/JPY reversed much of its rebound and headed back toward 155, after last week's rare US-Japan intervention created an asymmetric setup where traders chasing USD/JPY would have to contend with renewed intervention risk.

Meanwhile, Gold decisively cleared $4,300, a level that had capped its rebound earlier in the week, and accelerated above $4,350. Silver also surged toward $65, reinforcing the case that recent precious-metals rallies are developing into something more substantial than corrective rebounds.